Cal Am urged to partner with public agencies for desal plant

California American Water's proposal for a privately owned desalination plant could be facing a rocky road, according to three prominent public officials.

Following the well-publicized collapse of the public-private partnership at the core of the failed regional desal project, Cal Am decided to pursue building, owning and operating its own desal plant as part of its new water supply proposal filed with the state Public Utilities Commission on Monday.

Cal Am is partnering with two public agencies — the Monterey Peninsula Water Management District and the Monterey Regional Water Pollution Control Agency — on the aquifer storage and recovery and groundwater replenishment projects that make up nearly half of the proposed new water supply.

But the desal plant would be solely owned by Cal Am in violation of Monterey County's ordinance requiring that they be publicly owned. Cal Am officials have argued the ordinance doesn't apply to the company because it is exclusively regulated by the PUC, whose general counsel Frank Lindh has produced an opinion backing that premise.

However, county Supervisors Dave Potter and Jane Parker and Carmel Mayor Jason Burnett all expressed concern that the absence of public ownership and ongoing oversight in Cal Am's proposal could result in a legal challenge and a potentially lengthy delay for the project.

"I have said forever that if Cal Am doesn't find a public agency as a partner, there's going to be a problem," Potter said. "I know they hope they can get the Board of Supervisors to drop public ownership, but I told them I don't think they can win that fight. To say the county should walk away from the reason for the ordinance — public health and safety — is not a good idea. If they think they're going to litigate this, then I think they're going down the wrong path."

Parker said, "My feeling is the county passed the ordinance for a reason, and I think it fits in with my idea that the greatest public transparency possible is the way to go. I don't see any reason to throw it out."

Burnett, the newly minted mayor who is also the newest member of the Monterey Peninsula Regional Water Authority, said he has already engaged in discussions about the potential for a public partnership, and noted that Cal Am has shown a willingness to cooperate on other aspects of the water supply project.

"Overall, I think Cal Am's proposal is good," Burnett said. "But the public ownership portion is of concern. I see this as a divisive issue that will likely lead to more delay, and that's not good. I'm interested in seeing if we can address that. I think this is a good starting position for Cal Am. It's a good start."

Cal Am spokeswoman Catherine Bowie said company officials know there are discussions about a potential partnership but that she's not aware of any formal proposal. She said company officials are open to workable proposals as long as they don't slow down the process of getting the project on line in time to provide a source of water for the Peninsula by the end of 2016. That's when a state-ordered cutback in pumping from the Carmel River takes effect.

"We're certainly not eager to repeat the mistakes of the past," she said. "The issue for us is the deadline — 2016 is a real date."

Bowie stressed that the public will have an opportunity to participate in the PUC review process and that local organizations such as WaterPlus and LandWatch Monterey County are expected to be parties to the proceeding.

Potter said a privately owned desal plant would give Cal Am a "black eye" before the state Coastal Commission, where he served for years, and predicted the commissioners would not look favorably on converting a public resource to a private commodity.

He suggested that Cal Am could consider a limited public partnership that would give the county enough of a "level of comfort" to allow the project to move forward. While Potter dismissed the idea that the county would be involved, he suggested Cal Am could partner with the pollution control agency and consider locating the desal plant on the agency's 600-acre site.

Monterey City Councilwoman Libby Downey said she talked to Potter and Burnett about proposing a public partnership with Cal Am that would have the water management district build the desal plant, but a planned meeting with the company earlier in the week never happened.

Downey said she would still prefer public ownership but the community may need to get behind Cal Am's current proposal for now because it is most likely to meet the deadline. She said the parties could work on other alternatives as a fall-back in case Cal Am's project is delayed.

"I think we're caught between what we want and reality," she said.

Burnett said he believes a public partnership could offer access to better financing, and wants to see a full "apples-to-apples" comparison of private vs. public financing for the project. He said he expects plenty of discussion about public ownership and oversight in the coming days, and that the Peninsula water authority can work with the water management district to be a "fair judge" of the water supply proposal.

The authority is next scheduled to meet May 10.

LandWatch executive director Amy White said her organization doesn't understand why Cal Am isn't pursuing a public partnership, but noted there are other important issues still to be resolved, including water rights.